Global fund houses look to India JVs amid turmoil

By Nishant Kumar and Jeffrey Hodgson

MUMBAI/HONG KONG (Reuters) - Global financial turmoil and recent attacks in Mumbai will likely spur foreign fund houses still looking to enter the high potential India market to hedge their risks with local partnerships rather than going it alone.

Factors such as high brand building costs and knowledge of local issues have already spurred most international players to favour joint ventures over "greenfield" operations as they seek to tap the relatively fast-growing and savings-rich economy.

The requirement that foreign fund houses put up $50 million in capital for a wholly owned operation, compared with a tenth of that or less for a joint venture, is also seen fuelling the trend as hard-hit Western money managers seek to preserve cash.

"There is liquidity crunch so people would rather partner than commit that much of their resources. If you can still get a share of India pie with $5 million as opposed to $50 million, that's a no-brainer," said Vivek Prasad, a partner at Price Waterhouse in Mumbai.

Even before the attacks on India's financial capital that killed more than 170 people, foreign firms eyeing the country's 35-member industry had to weigh the impact of a drop of more than 50 percent this year in its once high-flying stocks.

But industry watchers said this has actually helped to spur interest among some international money managers, who had balked at paying fat prices demanded after a bull market helped industry assets quadruple from 2002 to 2007.

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